VAT Ruling No. 016-04

June 2, 2004 VAT RULING NO. 016-04 R.A. No. 7716 RMC 2-2004 Petron Corporation Petron Mega Plaza, 358 Sen. Gil Puyat Avenue, Makati City Attention: Luis A. Maligaya Corporate Secretary Gentlemen : This refers to your letter dated March 17, 2004 requesting for a clarificatory opinion on whether or not the additional 10% Value Added Tax (VAT for brevity) on wharfage fees should be imposed pursuant to Revenue Memorandum Circular No. 2-2004 (RMC 2-2004 for brevity). You assert that the 10% VAT on wharfage fees to be collected from you is tantamount to imposing VAT on your importation of raw materials like crude oil and alkylate and finished products such as liquefied petroleum gas, unleaded premium gasoline, aviation gasoline, diesel or gasoil, industrial fuel oil and asphalt, considering that Section 109(e) and (f) in relation to Section 148 of the 1997 Tax Code exempts the importation of such raw materials and petroleum products from VAT. You further assert that the wharfage fees are based on the volume of the raw materials and petroleum products imported and that the said fees are the amount assessed against the cargo loaded or discharged by the vessel based on metric tonnage for non-containerized cargo. In reply, please be informed that RMC 2-2004 clearly states that: "In view of the enactment of Republic Act No. 7716, all fees and charges collected by the Philippine Ports Authority (PPA) such as, but not limited to the following, are subject to value added tax: 1. Port Dues (Harbor fees)/Anchorage fees 2. Dockage-Berthing Income 3. Usage fee 4. Wharfage fees 5. Storage fees 6. Lay-up fees 7. Share in Arrastre/Stevedoring Income 8. Fund Management Income 9. Pilotage 10. All Other Income" The rationale for the inclusion of " all fees and charges collected by the Philippine Ports Authority " (PPA for brevity) subject to VAT was pursuant to the enactment into law of Republic Act No. 7716, which widened the tax base of the VAT system and thereby amending and/or repealing certain provisions of the Tax Code and other BIR issuances. This was manifestly explained in the said RMO 2-2004. It must be further stressed that the VAT on the importation of the raw materials and petroleum products, which is exempt under Section 109(e) and (f) in relation to Section 148 of the 1997 Tax Code, is entirely different from the VAT on wharfage fees and other fees and charges collected by PPA. Accordingly, this Office reiterates its pronouncement in RMC 2-2004 that all fees and charges collected by PPA shall be subject to VAT. SaCDTA Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group